What we learned at Parent Financial’s “Budgeting for Baby” class

Having a baby is an exciting time but it can also be filled with uncertainty, especially in the financial department. Sure those tiny diapers are adorable, but how much are they going to cost in the long run? (between $1,750 and $2,000 per child for disposables, according to most estimates).

That’s why our friends over at Parent Financial offer financial checklist classes for soon-to-be-parents at maternity centers throughout Charlotte and South Carolina. Each class is designed to help new and expecting parents prepare for the important financial changes that come with having a baby.

We attended the “Budgeting for Baby” class at CMC Main last weekend, and here are the top 10 things we learned from founder and financial adviser Court Creeden:

Sit down and review your (and your partner’s) health insurance plan. Court says lots of couples automatically add the wife and new baby onto the husband’s health insurance without checking to see whose plan is better. Does your plan allow you to add a child for free? Whose plan has the smaller co-pay? You’ll want to review the plans well before baby gets here and adds another layer of ongoing medical expenses. Even healthy babies have to go to the doctor regularly for checkups.

Figure out your out-of-pocket costs for delivery. Call your Human Resources manager and the hospital and have them walk you through exactly what you’ll be paying for the delivery, based on your insurance coverage. You’ll also want to figure out if costs are different based on different delivery scenarios. Does it change if you end up with a C-section? Court says it’s all too common for families to take home their little bundle of joy and be hit with a huge unexpected bill in the mailbox a few days later.

Consider having a CPA help you with your taxes this year. There are tons of tax benefits to having a little one, but if you’ve been doing your taxes on your own for years, you may be leaving money on the table.

Draw up a will. Look, it’s just not fun to talk about you or your partner dying, especially with a baby on the way, but if you don’t get this stuff on paper, the state will do it for you. Court says unless you make advanced arrangements, a probate judge will be the one who decides who will have custody of your child after you die. The courts also will dole out your assets to your child when he turns 18 — no matter what his (or her) level of maturity is. Your $1 million life insurance policy? It could get blown during one crazy teenage summer.

Speaking of life insurance, make sure you have enough of it. Talk radio and internet calculators may give you an easy formula — multiply your salary by 10, for example. But Court says it’s more effective to sit down and figure out your goals with the life insurance policy. You’ll likely want to make sure that if something happens to you, your surviving spouse and child will able to stay in your current house (and thus in the same school district). What else would you want the policy to do? Pay off some personal debt? Pay for part or all of your child’s college education? Put down some estimates and figure out exactly how much that would take, and then buy life insurance to cover it.

Check in on your auto insurance and home insurance. Adding a new family member is a great time to make sure all your insurances cover what you want them to. Court says state minimums for auto insurance are $30,000, $60,000 and $25,000 respectively to cover bodily injury, the cost of the accident and the cost of damaged property. But is that really an accurate reflection of how much it’ll cost when you get hurt while totaling that Mercedes in Myers Park? Court also says it’s a good time to make sure your home is insured to replacement value. If something happens to your home, you want your insurance check to build the exact same house — not a tiny shack. To lower your monthly or quarterly cost, Court suggests considering increasing your deductible.

Understand your long term disability plan. What’s your most valuable asset? Most people would say their home, but Court says it’s actually your income, since it pays for literally everything else. So if something happens — an illness, an accident — that makes you completely unable to work, that means your biggest asset is in major jeopardy. Court says now is the time to make sure you understand your long term disability plan through work. What percent of your salary is covered, and for how long? To do that, you’ll want to get a Certificate of Coverage or Summary Plan Document from your Human Resources office. Also, check your company’s definition of “disability.” Many companies only pay out for 24 months, so you might need to consider a plan outside of work.

Create a budget. Write down some totals for everything baby-related. The costs of formula, diapers, childcare, food, doctor visits and the like could add up to $2,000 or more a month, on top of your normal expenses. You’ll want to know that you’re able to cover it. To cut costs, Court suggested printing out a spreadsheet with columns for date, category and amount, and wrap it around your credit or debit card. If you write down every swipe, it’ll help you track small expenses like coffee and gas and make you more cognizant of what you’re spending.

Start (or add to) your emergency fund. What would happen if you or your spouse lose your job or there’s some other emergency? The answer to that question is especially important now that there’s another tiny person in the family to take care of. Court recommends having enough in savings to cover four months of your household expenses. But that number could change based on your situation. Have you heard rumblings of layoffs at your company? You may want to kick savings into overdrive. Write down a goal for your emergency fund and figure out how much you’d have to save per month to get to that goal. Then flip the script. Instead of saving whatever you have leftover after you’ve spent money all month, put money in savings first and foremost. Then you can have fun with the rest. It’ll keep your savings account from fluctuating and help you start building wealth.

Focus on the foundation. Court says lots of expectant couples walk into his office and want to start saving for their baby’s college, but they have no idea what their household budget is every month. Don’t jump the gun. Start with a set budget, a clear savings goal and the right amount of insurance, and the rest will come later.Of course the folks at Parent Financial can help with any and all of these items, and they have convenient offices located in Charlotte, Charleston and Greenville. Contact them here.